ACERS Custodial Services RFP

Contents

Introduction2

General Background4

Account Servicing5

Investment Manager Servicing6

Domestic and Global Asset Custody7

Accounting and Reporting8

Asset Pricing9

Income Collection and Cash Management 10

Systems and On-Line Capabilities 11

Performance, Analytics and Reporting Services 12

Securities Lending 13

Foreign Exchange Transactions 14

Transition and Conversion Management 15

Fees and Billing 16

Appendices
Introduction

The Arlington County Employees’ Retirement System (ACERS) is soliciting proposals from qualified vendors to serve as global custodian of its assets.

Scope of Work

The custodian’s services will include asset safe keeping, accounting for all portfolio transactions, reporting monthly on all transactions, asset values and performance, managing a securities lending program, providing short-term cash management, daily wire transfers and any other services required by ACERS.

ACERS Structure and Assets

The following attachments provide insight into ACERS assets and structure:

  • Fiscal 2017 Consolidated Annual Financial Report
  • List of Investment Managers detailing product, account structure and assets
  • International Market Listing
  • List of securities held, including CUSIP #

Proposal Requirements

The following sets forth the minimum requirements for respondents. Proposals from firms failing to meet these minimum requirements will not be considered.

  1. Statement of Understanding. In addition to responding fully to the attached RFP, candidate firms must include a brief statement that demonstrates they understand the scope of services and are capable of providing the quality of work necessary for ACERS to achieve its objectives.
  1. Financial Statements. Candidate firms must demonstrate financial stability by providing copies of audited financial statements for the prior three fiscal years. ACERS shall exercise its sole discretion in evaluation of such information.
  1. Experience. Candidate firms must have performed services described in this RFP for institutional clients for a minimum of five years.
  1. References. Candidate firms must provide reference and contact information for three current and three former clients, for whom the firm has provided services similar to those described in this RFP.

Evaluation Selection and Criteria

  • The extent to which the proposal meets the requirements of the RFP.
  • Overall organization and staff capabilities including experience and reputation, financial strength, and the depth, continuity and credentials of client services team.
  • Accounting, Reporting and Analytics capabilities.
  • Systems capabilities and limitations.
  • Asset custody capabilities.
  • Fees.
  • Interviews of candidate firms selected as finalists.

Submission Details and Schedule of Events

Fivecopies of responses to this RFP should be sent to:

RandeeStenroos

Arlington County Employees Retirement System

2100 Clarendon Blvd., Suite 504

Arlington, VA 22201

To be considered, proposals must be received by 5:00 p.m. on March 16, 2018.

All proposals should have the words “RFP Response” on the front of the envelope.

Questions or requests for clarification should be forwarded to:

Randee Stenroos

Arlington County Employees’ Retirement System

2100 Clarendon Blvd., Suite 504

Arlington, VA 22201

Email:

Trade Secrets or Proprietary Information

Trade secrets or proprietary information submitted by an offeror in connection with a procurement transaction shall not be subject to public disclosure under the Virginia Freedom of Information Act. However, the offeror must invoke the protection of this section prior to or upon submission of the data or other materials, and must identify the data or other materials to be protected and state the reasons why protection is necessary.

I.General Background

  1. Please comment on your organization’s overall financial strength and credit quality. Please include most recent S&P, Moody’s and Fitch bank watch ratings.
  1. Please provide a brief history of the firm, including its year of organization and the ownership structure of the firm, including any parent, affiliated companies or subsidiaries.
  1. What is the total number of Master Trust/Custody accounts? Please breakout by Public, Corporate, Endowment/Foundations, Taft-Hartley and Other.
  1. What is the total asset value of all Master Trust/Custody accounts? Please breakout by Public, Corporate, Endowment/Foundations, Taft-Hartley and Other.
  1. Detail the growth of Master Trust/Custody relationships during the past five years in terms of clients and asset values.
  1. Discuss the profitability of the Trust and Custody business using appropriate metrics.
  1. List any substantive issues raised by your independent auditors in your SOC1, 10-Q, 10-K or any other documents filed with the SEC or any other regulatory body. Please provide a copy of your most recent SOC1, 10-Q and 10-K reports.
  1. Describe your insurance, bonding, indemnification and risk management program provided to protect clients of trust and custody services. Each description should include: risk coverage, carriers, levels, limits, deductibles, policy expiration if applicable.
  1. Is your firm currently involved in pending litigation? If so, please explain.
  1. Please provide a summary of the finding of any examination or audit by any regulatory authority, governmental or SRO, of the firm over the last five years.
  1. Does your firm have a dedicated public funds group?
  1. Describe your strengths, highlighting the aspects of your service that make you unique.

II.Account Servicing

  1. Please provide a biographical sketch of all individuals who will be assigned to the account. Identify who would be responsible for the day-to-day servicing of the account. Please indicate specific duties and number of accounts for which they have current responsibilities.
  1. How do you determine the number of accounts assigned to each administrator?
  1. Describe the procedures that you use to assure continuity of services during vacations or other absences occurring within your account administration area.
  1. Describe your approach to staff hiring, education and training. Is there a minimum level if education and/or experience required for professional employees in the Trust group? If so, please explain.
  1. What level of turnover have you experienced in the last three years?
  1. Describe your approach to client servicing and product familiarization. How do you monitor client satisfaction?
  1. Please discuss how the following functional areas interact with one another in servicing the custody/trust clients: Investment managers, Accounting, Audit, and Report Generation.
  1. Please provide a standard custody contract for review.

III.Investment Manager Servicing

  1. Describe how your organization interacts with investment managers. Is there a separate manager liaison function? If so, please describe the structure of the group and how they communicate with the client service group. If not, please describe how your organization interacts and communicates with investment managers.
  1. How many investment managers do you work with?
  1. How do you monitor investment manager satisfaction?
  1. What are your capabilities for transitioning terminated manager portfolios? Can you manage liquidation programs, cross trading etc.?

IV.Domestic and Global Asset Custody

  1. Describe your trade settlement organization and process. Please include a flowchart illustrating how transactions post to your system.
  1. Describe your systems for registration and custody of domestic and foreign assets, including depositories used and level of interface with depository.
  1. Describe your sub-custodian selection criteria. Please provide a list of your sub-custodial relationships including length of time they have served in this capacity and the markets covered by each.
  1. Describe your systems for custody of depository-ineligible securities. List investments that require non-standard processing.
  1. What means of communication do you utilize to communicate with your sub-custodians for instructing trades?
  1. Discuss your procedures for tracking failed trades and reporting failed trades to clients and investment managers. How quickly are failed trades reported? Do you guarantee proceeds? In which markets?
  1. Describe your physical securities safekeeping facilities?
  1. How do you handle information on corporate activities such as tender offers, exchange offers, etc.?
  1. How do you provide for prompt delivery and reporting of domestic and foreign proxies and proxy statements to clients and investment managers?
  1. Describe your process for handling class action suits. How do you track, file, monitor and report on these actions? Is there an additional charge for this service? How do you handle foreign class actions claims? Do you handle anti-trust claims?
  1. Do you process tax reclaims?
  1. Does your insurance cover all of your global custody activities including those of your sub-custodians?

V.Accounting and Reporting

  1. Describe your accounting system (trade date or settlement date, accrual, or cash basis). Can you provide reports on any of these accounting bases?
  1. Please provide a list of each standard report and indicate how many days after period end the report is available. Are reports reviewed and audited prior to release?
  1. How far back in time can statements of assets and transactions “as of” a certain date be run?
  1. Do you have the capacity to capture and report brokerage commissions generated by an account? Explain.
  1. Do asset valuations and transaction statements reflect pending transactions?
  1. How do you handle corrections/reversals (i.e. as adjustments or as offsetting purchases and sales)?
  1. Describe your reporting capabilities for derivatives, options and futures.
  1. Is there a general audit system in place for Master Custody/Master Trust? Is it certified by a major accounting firm? Please provide a copy of your most recent audit report from an independent accounting firm.
  1. Describe your procedures to verify that transactions and holdings statements balance with those of investment managers. How do you resolve differences?
  1. Do you support automated journal entry posting? If so, what are the monthly close timelines? Can you interact with Oracle Prism? Please identify any related special and ongoing costs associate with this service.
  1. Describe your quality control procedures to ensure reporting accuracy. Are reports audited before they are delivered to clients? Who audits and corrects reports. How are incorrect reports restated and reissued?
  1. Describe your organization’s process for evaluating the effectiveness of internal controls.

VI.Asset Pricing

  1. What sources do you use for pricing each category of securities and when are prices available?
  1. Describe the procedures for identifying unusual or significant pricing changes from the prior period. What procedure and control points are in place to ensure pricing accuracy?
  1. How do you detect, investigate and resolve pricing differences with investment managers, particularly as it relates to less frequently traded securities? How are these issues communicated?
  1. How often are public markets securities priced? Please indicate all securities types, the source of pricing and frequency of updates.
  1. How do you value difficult-to-price assets such as private placement, and derivatives?

VII.Income Collection & Cash Management

  1. Describe your policies concerning the collection and crediting of interest and dividend income and the automatic investment of cash balances.
  1. When does income become available for investment?
  1. Describe your cash management services used for short-term cash reserves.

VIII.Systems and On-Line Capabilities

General

  1. Is the system dedicated to custody or shared with other units in your organization
  1. Please describe your systems security to protect against unauthorized access to the custody system
  1. How many months of holdings and transactions data are available (past three months, year, etc.)?
  1. Does your on-line system provide the client and/or investment manager with investable cash balances each morning? If not, how is this information conveyed?
  1. Describe your documented disaster recovery plan and procedure.
  1. Describe your routine maintenance and back-up procedures.
  1. Describe plans for future enhancements including capital commitments as percentage of revenue over the last three years.

On-Line

  1. Describe your on-line system capabilities including design, inquiry features, and reporting flexibility.
  1. What is the time lag between trade execution, availability of on-line transaction data to the client and posting to the accounting system?
  1. Do you provide on-line services to your clients, investment managers and consultants? How long has it been offered?
  1. How many clients are currently using on-line service?
  1. What provisions are made for training of client personnel on the on-line system?

IX.Performance, Analytics and Reporting Services

  1. What distinguishes your performance and analytics system from the competition? Describe any elements of your package that you believe to be unique.
  1. Please list all performance measurement/analytic and comparison reports available as part of your standard offering. How soon after period end are preliminary and final reports available?
  1. Describe your process and systems for performance measurement and calculation. Is the data separate or linked directly with your accounting system?
  1. Describe your systems and processes for reporting limited partnerships, alternative investments and real estate. Is the performance for these asset classes reported differently than for domestic equities?
  1. Can you compare rates of return of our managers versus a substantial universe of similar funds?
  1. Are you willing and able to backload data?
  1. Can you produce custom benchmarks? Explain.
  1. Can different accounts be combined on-line for performance reporting and analysis?
  1. Can reports be tailored to meet individualized client needs? Explain.
  1. Please provide pricing for a reporting package that includes the following minimum requirements: 1) general fund and manager monthly performance, 2) access to relevant benchmark history, 3) portfolio and manager compliance reporting, 4) attribution analysis at both fund and manager level and 5) relative peer comparisons. Please note additional costs for daily access to the above data, where applicable.
  1. Please provide a la carte pricing for additional reporting services that are available, but not listed above.

X.Securities Lending

  1. Please describe your securities lending program.
  1. What are the risks in securities lending and how do you manage these risks?
  1. Do you act as a fiduciary on ACERS behalf?
  1. With how many borrowers do you have business relationships? How are these brokers selected? How often is creditworthiness reviewed?
  1. What types and percentage of collateral do you require? Describe your mark-to-market procedures.
  1. Discuss collateral reinvestment options. Discuss procedures and controls that ensure cash collateral is managed to conform to investment policy.
  1. How do you coordinate your securities lending activities with the client’s investment manager(s)?
  1. Have any of your clients experienced any negative loans? What is your policy for minimizing the risk of negative loans?
  1. Have any of your borrowers defaulted? If yes, were you able to make a full recovery?
  1. Have any of your clients ever lost money in your securities lending program?
  1. To what degree are your securities lending clients insured against losses from participation in your program? What indemnifications do you provide?
  1. Explain your security loan allocation system and the basis on which you make such allocations to all clients. How do you provide equal opportunity to all participating clients to lend their securities?
  1. How is the income generated from securities lending split between the client and you?
  1. Please describe the securities lending reports you provide.

XI.Foreign Exchange

  1. Describe your process for handling foreign exchange transactions, including a description of services offered and pricing methodologies.
  1. How are non-negotiated standing instruction foreign exchange transactions priced?
  1. Do you act as a fiduciary in these transactions?
  1. Please provide a sample report on foreign exchange activity.
  1. Does your foreign exchange reporting include time of day stamp?

XII.Transition and Conversion Management

  1. Please describe the conversion process (who is responsible for coordinating activities, who participates, what activities must occur, lead time, etc.).
  1. Please provide a sample timetable including the type and amount of resources to be provided by your organization and required of the client.
  1. Do you have a dedicated conversion team? Who would be on our conversion team (names, positions, experience and current workload)? How would they interact with ACERS?
  1. Describe in detail your conversion testing procedures.
  1. How do you handle transactions which are in process during the transition process?
  1. Do you have a conversion manual?
  1. At what point in the process does the ongoing client team become involved and how is the hand-off completed?
  1. Please describe in detail any expenses which may be incurred by the client in the process of transition.
  1. How many conversions have you completed over the last twelve months? How many are currently scheduled for the remainder of the year?

XIII. Fees and Billing

  1. Please provide your best fee schedule for the ACERS relationship and list all charges. Please quote with and without securities lending in the following format:

  1. For how long will you commit to providing the services for the fees indicated above?
  1. What has been the history of fee increases? Are any increases anticipated in the next three years? If so, please explain.
  1. Do you offer a flat annual fee option?
  1. If based on assets, describe the balance calculation methodology (i.e. beginning, ending, average or other).
  1. What is the billing frequency? Please include an actual bill for a similar account in terms of size and complexity.